A: If you get things wrong, it can damage your reputation, so we have to keep upskilling the team. At the same time, we can’t do everything in-house, so we also use advisers, which gives us instant access to all the latest knowledge and skills.
Malcolm Finn: coffee shop talk
Malcolm Finn is Global Financial Controller at Costa, the coffee store chain that is part of the UK-based Whitbread Group. Reporting asked him about some of the challenges he faces and how reporting is changing.
Q: What are the main challenges you face in your reporting?
A: At the moment, we’re dealing with the three big changes that are coming up; IFRS 9 (Financial Instruments), IFRS 15 (Revenue Recognition) and IFRS 16 (Leases).
Many corporates anticipate that IFRS 15 and IFRS 16 will have the most significant impact, not only at the financial reporting outcome level, but also on internal processes and controls. Additionally, the changes will not only be felt in finance, but cross-functionally. For example, will reward teams need to realign bonus and incentives schemes? Will procurement think about contract design, acquisition and management in the context of pricing, bid costs and ongoing top-line performance relative to the performance obligations? The financial and IT investment needed to track and sustainably produce new data and disclosures from an understanding of source contracts is potentially huge.
More generally, there is an incessant increase in reporting requirements, at the same time as there’s a pressure to make the reporting clearer and more transparent. You have to constantly ask yourself how you can get the right message across without diluting it. You’ve always got to take a step back and think about what the user wants, how we can show our transparency and how we can build trust.
The role of the finance leadership is to create a culture of curiosity; to stay agile and responsive, anticipate the changing environment and look ahead
A: It’s very important to us. For example, coffee products in all markets are 100% Rainforest Alliance Certified and we have a group-wide sustainable supplier program. We have also been successful in reducing carbon emissions (by 21% against 2014 baseline), diverting waste from landfill and recycling waste. Our new roastery was the first industrial processing site to reach BREEAM “Outstanding” accreditation under the new 2014 standard. Over the last year I have been lobbying for us to go from 70% to 100% renewable energy in our equity stores, and I am pleased to say we got there.
A: Corporate reporting is not just about financial information, and we continue to see increased transparency of the business and the environment in which it operates, together with an understanding of risks – both current and emerging. A clear, concise and authentic communication that articulates how the organization operates differently from its peers should help attract the right investors for that organization, and the new framework proposed by the Taskforce on Climate-Related Financial Disclosures could be helpful in this regard.
However, we should always consider the design of annual reports as reporting increases, and discussions on sustainability shouldn’t really be presented in isolation from other content. I have often talked about how the business model concept can be used as an integrating framework for annual report commentaries on strategy, risk and performance, which should also encompass sustainability disclosures.
A: Everyone should be thinking about Integrated Reporting now. It’s part of the challenge of keeping the reports manageable and relevant.
There are also things you can’t measure. When you think of triple-bottom-line reporting – planet, people, profit – there’s a lot of reporting on planet and profit, but not so much on people. How do we talk about culture? How do we talk about the engagement of teams in the context of the performance of the company? It’s becoming increasingly relevant, because analysts are now commenting on corporate failures caused by culture.
Ultimately, the human factor in organizations is critical, so why is this not reported? This is probably the next thing that’s coming, and I’d love to lead the way in that.
A: In some ways, the title “CFO” is a misnomer, as a number of functions other than finance typically report to the CFO. So while it is “chiefly finance,” there will be other leadership roles the CFO performs, including strategic leadership, transformations and business change, and capital allocation.
Common CFO agenda items beyond traditional finance are an innovation and growth imperative, change and transformation, and responding to and making decisions under the headings of uncertainty, performance and efficiency. The CFO and the finance team have become the dominant logic in the organization, and the voice of the company in investor relations and communications with the board.
As the role of the CFO evolves, it’s logical that the role of the finance team will also evolve, particularly with increasing use of technology, AI, cloud systems and analytics engines. Finance teams will be able to spend more time adding value, insight and business impact. The role of the finance leadership is to create a culture of curiosity; to stay agile and responsive, anticipate the changing environment and look ahead.